CDCAN REPORT #193-2011: 2009 Medi-Cal rate freeze reinstated by US 9th Circuit Court of Appeals for Intermediate Care Facilities for Developmentally Disabled & Freestanding Pediatric Subacute Facilities

Federal Appeals Court Reinstates 2009 Medi-Cal Rate Freeze for Intermediate Care Facilities for Developmentally Disabled and Freestanding Pediatric Subacute Care Facilities

SACRAMENTO, CA (CDCAN)  [Last updated 11/30/2011 11:50 PM] - The US 9th Circuit Court of Appeals on Wednesday (November 30th) reinstated the 2009 Medi-Cal rate freeze for intermediate care facilities for the developmentally disabled (ICF-DD), intermediate care facilities for the mentally retarded (ICF/MR) and freestanding pediatric subacute facilities, reversing a lower federal district court that blocked in May, the implementation of that freeze for those providers.  The decision is a major setback for hundreds of facilities, thousands of workers and for thousands of people with developmental disabilities and children and their families in the Medi-Cal program - and a rare court victory on a budget issue for the State.  [A copy of the 15 page published opinion is attached to this CDCAN Report titled "2011-11-30 - Developmental Services Network et al v. Toby Douglas - 11-55851 (US 9th Court of Appeals Ruling).pdf".  The document was saved as a document pdf file, so persons who are blind or sight impaired should be able to read it using a screen reading device.] While the providers who filed the lawsuits could appeal the decision to the US Supreme Court it is fairly certain that they will not pursue that option.

What the Federal Appeals Court Decided

While the federal appeals court agreed with providers that California violated federal law by implementing the rate freeze before it obtained approval by the federal government (through an official request to change the state's Medicaid State Plan known as a "State Plan Amendment" or 'SPA"), it found that providers did not have a individual right under Section 1983 (42 USC Section 1983) to enforce that provision of the federal Medicaid law.  Section 1983 allows persons to sue for a violation of a federal right though not solely because of a violation of a federal law, according to a previous US Supreme Court decision.

The federal appeals court - the federal court just below the US Supreme Court - concluded in its opinion that (with definitions of certain words and abbreviations provided by CDCAN):

Despite our contrary holdings over the past decades, the State has allowed its economic difficulties to obnebulate [confuse or befog] its analysis and render it purblind [lacking in vision or insight] to the simple fact that it cannot properly implement changes to its Medicaid plan before the federal government (DHHS [US Department of Health and Human Services] through CMS [Centers for Medicare and Medicaid Services] at this time) has approved a submitted SPA [State Plan Amendment]. Yet, while it is regrettable that the State refuses to abide by the law [italics in opinion], that does not mean that a right [italics in opinion] which will support a cause of action under Section 1983 has been unambiguously conferred upon the Providers; they cannot maintain an action under that section.  Therefore, we must vacate the preliminary injunction.

Impact of the Federal Appeals Court Decision

• The 2009 Medi-Cal rate freeze for intermediate care facilities for the developmentally disabled (ICF/DD), intermediate care facilities for the mentally retarded (ICF/MR) and freestanding pediatric subacute care facilities - that was stopped from further implementation due to a May 5, 2011 lower federal district court order - will be reinstated.  It is not certain yet how or when the Department of Health Care Services will carry out the reinstatement of the rate freeze for these specific facilities.
• The appeals court decision does not impact or address a 10% Medi-Cal provider rate reduction that the Brown Administration is still considering for these facilities.  In early October the Department of Health Care Services, in announcing that it received approval from the federal government to implement 10% rate reductions to many types of Medi-Cal providers, said then that it still had not decided whether to apply that reduction to intermediate care facilities for the developmentally disabled or to freestanding pediatric subacute care facilities.  No decision has yet been announced on whether or not rate reductions will be applied to those providers.
• The appeals court decision does not directly impact separate lawsuits filed by various advocacy groups and provider organizations - including one by the Medicaid Defense Fund - that seek to stop implementation of the 10% rate reduction to most fee-for-service Medi-Cal providers.  The lower federal district court hearing date for the Medicaid Defense Fund lawsuit is scheduled for December 19th.  The Department of Health Care Services announced earlier in November that it would not implement those reductions - authorized by the 2011-2012 State Budget and approved in October by the federal government - until after the December 19th court hearing.
• The appeals court decision did not address the specific issue of "Supremacy Clause" in Article 6 section 2 of the US Constitution that provides that the laws of the United States (federal laws) "shall be the supreme Law of the Land."  That issue is being considered by the US Supreme Court in several different lawsuits brought by advocacy groups and provider groups seeking to stop Medi-Cal provider rate reductions in 2008 and 2009 (including 2009 rollback of the State's contribution toward In-Home Supportive Services worker wages known as "state participation").  Those cases were heard by the US Supreme Court on October 3, 2011 and a decision from the high court is expected sometime before the end of June next year.  Additional briefs were filed by both sides in mid-November as requested by the US Supreme Court.  [see separate CDCAN Report later this week for an update on those cases and other federal issues impacting people with disabilities, mental health needs and seniors].

Two Separate Lawsuits Filed and Then Combined

The US 9th Circuit Court of Appeals decision applies to two separate cases, filed originally in April 2010, that the lower federal court combined or consolidated because each covered the same issues and similar providers impacted by the rate freeze (the consolidated both cases on June 15, 2010):

• Developmental Services Network and UCP of Los Angeles and Ventura Counties vs. Toby Douglas et al [Case No. CV 10-3284 CAS (MAN) and
• California Association of Health Facilities vs. Toby Douglas et al [Case No. CV 10-3259 CAS (MAN)
  • The name “Toby Douglas” refers to the person who was director of the Department of Health Care Services – the state agency that oversees the State’s Medicaid program (called “Medi-Cal”).

Providers Serve Persons With Developmental Disabilities and Children

• Intermediate Care Facilities for the Developmentally Disabled - Nursing (ICF/DD-N) and Intermediate Care Facilities for the Developmentally Disabled - Habilitative (ICF/DD-H) provide community-based 24 hour supports and services for persons with developmental disabilities with significant habilitative, nursing, and behavioral needs.  About 99% of those persons with developmental disabilities who reside in these facilities in the Medi-Cal program.
• Pediatric subacute care facilities are very intensive, licensed, skilled nursing care provided within an acute care hospital or in free-standing nursing facilities level B, to children who have a fragile medical condition.
• Advocates for the providers and their thousands of workers - and for the thousands of people and their families who reside in those facilities - say the reinstatement of the rate freeze will be "devastating" and result in significant cutbacks and reductions including closures, loss of services and jobs.

Rate Freeze Was Part of 2009-2010 State Budget Revised July 2009

• The rate freeze for those three types of Medi-Cal providers – along with other long term care facilities - was imposed as part of the 2009-2010 State Budget as revised in July 2009.  That budget provision froze rates for those three types of providers at what it was during the 2008-2009 State budget year.
• The rate freeze for those three types of long term care facilities was in budget related legislation, ABx4 5 (called budget trailer bill because it follows or trails the main State budget bill – the “x4” stands for the 4th extraordinary or special session of the Legislature that year), passed by State Senate 29 to 11 on July 23, 2009, and then by the Assembly by a vote of 57 to 20 and signed by then Governor Arnold Schwarzenegger on July 28, 2009.

File Attachments: 

2011-11-30 - Developmental Services Network et al v. Toby Douglas - 11-55851 (US 9th Court of Appeals Ruling).pdf (72.11 KB)